The Project Management Institute (PMI) describes portfolio management concepts, principles, domains and a vocabulary that are seen as best practices. Performing portfolio management based on PMI means that an organization uses principles and tools that are generally recognized and of which there is a widespread consensus about their value and usefulness. This is why portfolio management as seen by PMI can be applied to any organization whatever a specific management framework like the IPMA Competence Baseline, PRINCE2 or HERMES is used or not. This is the reason why the PMI Standard for Portfolio Management (2017) is used as a bases for this post.

Important to say is that any management activities should not be applied uniformly. It has to be determined what is appropriate for any portfolio given its environment, and in the context of the organization’s project and program management framework.

Literature sees portfolios as series of projects assessed bye one two or probably three criteria. Very often a four-quadrant diagram is used where projects are positioned based on criteria like technological advantage, client satisfaction, market share, improving productivity or even brand awareness. (Motzel, 2006, p. 141; Schelle et al., 2005, p. 453)

A portfolio is defined by PMI as follows (2017, p. 3):
“A portfolio is a collection of projects, programs, subsidiary portfolios, and operations managed as a group to achieve strategic objectives. The portfolio components, such as programs and projects within the portfolio, are quantifiable (e.g., identified, categorized, evaluated, prioritized, authorized). … Portfolio components compete for a share of some or all of a set of limited resources. ...”

Portfolio managers have the responsibility for the implementation of portfolio management. Where program and project managers primarily focus on work to be done, the portfolio manager’s primary focus is on doing the right work from an enterprise perspective. The role of the portfolio manager includes (PMI, 2017, p. 14):

• Conveying to the portfolio governing body how the portfolio components as a whole are aligned and realigned with the strategic goals.
• Capturing the portfolio impact and value creation against strategic directives.
• Providing appropriate recommendations or options for action.
• Influencing and managing the process of resource allocation.
• Overseeing or coordinating with portfolio component managers on implementation.
• Receiving information on portfolio component performance and progress.
• Reporting portfolio progress to top management.

There are six portfolio management performance domains identified around the portfolio life cycle.

Portfolio Life Cycle

Portfolios go through a life cycle that includes initiation, planning, execution, and optimization. It is crucial balancing stability with adaptability in today’s constantly changing world.

Example of Portfolio Life Cycle Activities (PMI, 2017, p. 23)

Stage	Example Activities
Initiation	Portfolio strategy and management plans created, portfolio selection and prioritization criteria defined, portfolio roadmap created, initial component lists created.
Planning	Capacity and capability planning, portfolio roadmap refined, portfolio continuously realigned to strategy, portfolio component list reviews.
Execution	Optimization/transition of portfolio, portfolio health status and metrics reports, demand and resource capacity planning adjustments, governance decisions via change management, feasibility reviews, proof of concepts and pilots.
Optimization	Optimization of portfolio, demand and resource capacity planning adjustments, revisit business cases for adjustments, portfolio components closure.

Portfolio Strategic Management

The portfolio strategic planning process consists of developing a strategic plan for the portfolio and aligning it to the organizational strategy. The portfolio components must be aligned with the strategic objectives and the impact must be constantly monitored. (PMI, 2017, p. 31)

The portfolio strategic plan consists of strategic objectives and strategic initiatives.

There is a portfolio roadmap as a visual high-level representation that details how the portfolio and its relevant components are tied to the strategic goals of the organization (PMI, 2017, p. 35).

Portfolio Governance

An open and transparent governance covers all portfolio management processes for categorizing, prioritizing, selecting, and approving portfolio components. Governance is the framework within which portfolio management works.

Portfolio governance design has a significant influence on whether the portfolio can consistently meet its objectives throughout its life cycle. Inappropriate governance increases the risk of component failure and jeopardizes the overall success of the portfolio. Common factors to consider when optimizing portfolio governance include the following (PMI, 2017, p. 46):

• Legislative environment.
• Regulatory environment.
• Decision-making hierarchy.
• Alignment with organizational governance.
• Alignment with organizational culture.

Portfolio Capacity and Capability Management

The portfolio components and the implementation roadmap are balanced against the organization’s capacity and capability.

Capacity management addresses what types of resources are needed, how many, and when they are needed. They following types of resources have to be considered (PMI, 2017, p. 53):

• Availability of human resources to support the portfolio (human capital).
• Availability of funds to support the portfolio (financial capital).
• Availability of physical assets, such as machinery, office space, factory sites, etc. (assets).
• Availability of patents, copyrights, etc. (intellectual capital).

Capacity planning allows for an understanding of portfolio components resource needs against the available capacity of the resources. Supply and demand need to be managed and continuously optimized.

Capabilities have to be manged as well. A capability is the ability of an organization through its people, processes, and systems to execute an entire portfolio. A capability assessment is an internal analysis regarding what the organization capabilities are. Developing organizational and individual capabilities depends on maintaining, improving, or developing requisite competences. (PMI, 2017, p. 58-61)

An overall performance reporting and analytics of capacity- and capability-related metrics are required to keep the entire planning under control.

Portfolio Stakeholder Engagement

By staying aligned and connected with stakeholders, portfolios improve the probability of delivering value. The exchange of information, improved transparency, and stakeholder buy-in are very important.

The iterative steps of stakeholder engagement and communication consist of the following (PMI, 2017, p. 64):

• Stakeholder identification and analysis.
• Stakeholder engagement planning.
• Stakeholder engagement activities.

A tool for stakeholder identification and analysis is to list for every stakeholder its concern and context. For instance, a user’s concern is “use a reliable and fully functional solution” and his context might be “the solution owner”. In the stakeholder engagement planning it is helpful to use a communication matrix to define communication areas like for instance “portfolio performance reports” with their frequency like weekly or monthly along with the intended recipients (stakeholders) and the used communication media, more generally known as communication vehicles. (PMI, 2017, p. 69, 73)

Portfolio Value Management

Portfolio Value Management enables and controls investments and monitors the expected returns based on the organizational strategy. Very often projects are assessed and positioned based on criteria like resource capacity, client satisfaction, market share, improving productivity or brand awareness.

To effectively manage value, the portfolio manager should (PMI, 2017, p. 77):

• Negotiate expected value: Negotiate the value to be created by the portfolio against the aims of the organizational strategy and for each portfolio component.
• Maximize return: Plan and enact an approach to deliver each component at the lowest, safe economic cost without negative impact to the required effects and value.
• Realize value: Ensure that the value required to be realized by the investment in the portfolio is achieved.
• Measure performance: Measure the performance achieved by the outputs generated by the components in the portfolio.
• Report value: Report the value achieved based on the metrics. This is a political act in that the value achieved consists of a narrative-related achievement in light of applicable risks, the impact of shifts in the environment, and possible changes in organizational purpose or worldview.

Portfolio Risk Management

Portfolio Risk Management evaluates opportunities and threats and considers how those risks may impact the achievement of the portfolio strategic plan and objectives.

Managing risks at all levels is an active process involving continuous planning, analysis, response, and monitoring and control. The execution of response strategies should be anticipatory and implemented by trigger events that launch response actions before the risk materializes so that opportunities may be enhanced or threats may be diminished.

There are four key elements in portfolio risk management: Risk Planning, Risk Identification, Risk Assessment, and Risk Response.

It is important to establish a common understanding of risk and the organization must be prepared for the likelihood and impact of known threats or opportunities. The risk appetite statement is the articulation of the risks that an organization is willing to accept, or to avoid, in order to achieve its business objectives. The risk appetite statement should be based on a review of the perspectives and concerns of all stakeholders and should address the implications of current organizational strategies and practices.

Tags:Change Management, Finanzen, ICT, Kommunikation, Management, Organisation, Projektmanagement, Risikomanagement, Stakeholder